2015 (8) TMI 218 - AT - Income Tax

Tribunal quashes Section 153C proceedings for lack of proper jurisdictional satisfaction.

Smt. Uma Prasad Versus The Deputy Commissioner of Income Tax, Central Circle 1 (1), Bangalore.

The Tribunal allowed the appeals by the assessee, quashing the proceedings under Section 153C due to the improper assumption of jurisdiction. The Tribunal ... Validity of assessment u/s 153C - whether on 8.5.2009, when proceedings were initiated against the assessee u/s. 153C, there was material to show that the document found and seized in the course of search of Skyline group of cases belonged to the assessee? - Held that:- The condition precedent for issuing notice u/s. 153C is that the document seized in the course of search of Skyline group of cases should belong to the assessee. In the present case, what was found was a photocopy of the agreement for sale dated 18.4.2004. Purchaser has not signed this document. In the course of search nobody was examined nor post-search investigations was made regarding the absence of signature of the assessee in this document. The document in question is a photocopy of agreement for sale dated 18.4.2004, which is signed only by the Vendors and in which the assessee’s name as purchaser is found, but the assessee’s signature is not found in the said document. As we have already observed, there has been no post-search enquiries on the aforesaid document. In such circumstances, we fail to see as to how the AO formed an opinion that the document found in the course of search belongs to the assessee. The proceedings against the assessee commenced on issue of notice u/s. 153C on 8.5.2009. In the order u/s. 153C, there is a reference to the agreement for sale seized and the difference in value between registered document and agreement for sale. There is a reference to show cause notice dated 18.11.2004 issued to assessee and reply dated 19.11.09 filed by the assessee. The order of assessment was passed by the AO on 29.12.2009 and there is no reference to any other document or statement in the order of assessment. Even before us, no material was placed regarding the basis on which satisfaction note dated 8.5.2009 was recorded by the AO. In these circumstances, we are of the view that assumption of jurisdiction u/s 153C of the Act was not proper and therefore the proceedings for both the assessment years are required to be quashed. We also derive support for the above conclusion from the decision of Vijaybhai N Chandrani v. ACIT,(2010 (3) TMI 770 - Gujarat High Court ), wherein it was held that the fact of a reference to the name of person in the seized document cannot be the basis to come to the conclusion that the document belonged to the said person. - Decided in favour of assessee. Issues Involved:1. Validity of the assumption of jurisdiction under Section 153C of the Income Tax Act.2. Addition of unexplained cash payments for the assessment years 2005-06 and 2006-07.Detailed Analysis:1. Validity of the Assumption of Jurisdiction under Section 153C:The primary issue in this case was whether the Assessing Officer (AO) had validly assumed jurisdiction under Section 153C of the Income Tax Act. The AO initiated action based on a search and seizure operation conducted in the case of Skyline group of cases, during which a document (an unsigned agreement for sale) was found and seized. The AO recorded a satisfaction note stating that the document belonged to the assessee, thereby initiating proceedings under Section 153C.The assessee challenged this on the grounds that the unsigned document could not be the basis for assuming jurisdiction under Section 153C. The critical condition for assuming jurisdiction under this section is that the AO of the searched person should be satisfied that the seized document 'belongs' to some other person. The Tribunal noted that the document in question was a photocopy of an agreement for sale signed only by the vendors and not by the assessee. There were no post-search inquiries to substantiate the AO's satisfaction that the document belonged to the assessee.The Tribunal referred to judicial precedents, including the Hon'ble Madhya Pradesh High Court's decision in CIT v. M/s. Mechmen and the ITAT Delhi Bench's decision in Tanveer Collections P. Ltd. v. ACIT, which emphasized that satisfaction must be recorded both in the case of the person searched and the person against whom proceedings are initiated. The Tribunal concluded that the assumption of jurisdiction under Section 153C was not proper as there was no material to show that the seized document belonged to the assessee at the time of initiating proceedings.2. Addition of Unexplained Cash Payments:The AO added sums of Rs. 25 lakhs and Rs. 6.20 lakhs as unexplained cash payments for the assessment years 2005-06 and 2006-07, respectively. This was based on the seized agreement for sale, which indicated cash payments that were not reflected in the registered sale deed.The assessee contended that the cash payments were omitted by mistake from the books of account and offered to include them as income for the respective assessment years. However, the CIT(A) upheld the AO's additions, reasoning that the absence of the assessee's signature on the agreement did not undermine its veracity and that the cash payments could not be explained by the cash book submitted by the assessee.Since the Tribunal found the assumption of jurisdiction under Section 153C to be invalid, it did not delve into the merits of the additions made by the AO. The Tribunal quashed the proceedings under Section 153C, rendering the additions moot.Conclusion:The Tribunal allowed the appeals by the assessee, quashing the proceedings under Section 153C due to the improper assumption of jurisdiction. The Tribunal emphasized the necessity of proper satisfaction being recorded by the AO of the person searched and the person against whom proceedings are initiated. The other arguments on the merits of the case were not considered due to the quashing of the proceedings.